We used several sources to assess the agreements between the European Commission, eu Member States and major tobacco manufacturers. Despite the lack of data and secrecy of these contracts, the evidence suggests that they are ineffective. Seizure payments, for example, do not provide an incentive for TCTS to end their involvement in cigarette smuggling because the agreements contain too many loopholes and the value recovered from taxes is minimal compared to the financial losses associated with illegal cigarette trafficking. Anti-counterfeiting agreements in the tobacco sectorBrite American Tobacco (BAT)Cheap smuggling of white cigarettesGilles PargneauxImperial Tobacco Limited (ITL)Ingeborg GräßleJapan Tobacco International (JTI)Philip Morris International (PMI)Politico EuropeQuentin Arièstobacco Senior OLAF officials working on the operational side of the Office`s anti-fraud efforts have already indicated that they wish to maintain the agreements of which they are aware. Hofmann`s email suggests that OLAF`s political wing is also in the game. From May 2019, the Tobacco Products Directive will introduce a new EU-wide traceability system for cigarettes destined for the EU market or placed on the market. The Cclatian Protocol, on the other hand, contains a number of important provisions, including licensing requirements for the manufacture of tobacco products and manufacturing facilities, increased control in free zones and provisions on money-laundering. In the long term, the CCSA protocol also aims to create a global tracking and tracing system. Contraband tobacco violates the strict rules introduced by the EU and its member governments for the production, distribution and sale of tobacco products. It has many harmful effects, in particular: it is very difficult to measure the size of the illicit market for tobacco products, as is the case for other covert activities in general and in all EU Member States.

Overall, cooperation has been effective under the anti-fraud agreements between the EU, Member States and the four main tobacco producers (one of which, the PMI agreement, has since expired). For example, the prevalence of PMI smuggling in the illegal EU tobacco market fell by around 85% between 2006 and 2014. “Since they are working with the industry on a specific agreement, this agreement contains a kind of secret clause on how they work on a daily basis. So what their groups are saying is: `Ok, be careful, because at the moment OLAF officials or customs officers could be deployed by the tobacco industry.` The illegal market has changed considerably. Therefore, in its assessment, the European Commission questioned the relevance of such an instrument in view of the increase in the number of cheap (illegal) “whites”, given the administrative and reputational costs for the authorities resulting from cooperation with tobacco manufacturers.9 Legislation on tobacco control and illicit trade control has also evolved considerably since the entry into force of the PMI Agreement in 2004. The European Commission`s assessment shows the limits of the PMI agreement – and therefore also of the other agreements – in the effective fight against today`s illegal trade. In particular, TPD-2 introduces new tools to combat illicit trade in tobacco products, as described in Section 6.1. However, the European Commission`s assessment recognises that the PMI agreement offers a global geographical scope in terms of case management follow-up, but has only achieved partial global coverage in terms of packaging-level labelling.10 Finally, the evaluation concludes that other important aspects covered by the PMI agreement, such as due diligence, anti-money laundering, seizure payments and supporting investigators will be largely covered by the new future rules under the Cclatian Protocol. The Administrative Cooperation Agreement signed by OLAF and the Belarus National Customs Committee in July 2016 is a technical and operational instrument. It aims to facilitate the practical aspects of investigative cooperation between the two services in general. The agreement should help OLAF and the Belarusian authorities to cooperate more effectively on the ground in the fight against illicit tobacco trafficking. For example, during the period 2006-2015, the PMI paid a total of €2,275,471.07 for seizures related to the United Kingdom.

Of this amount, €2,173,456.89 was attributable to the UNITED Kingdom, while the balance of €102,014.18 went to the EU. During the same period, the total amount (EU-wide) paid by PMI for seizures under the agreement amounted to 68,228,115,115,38.6 The EU has already started negotiations with PMI for a possible extension of its 2004 agreement, while pmI is simultaneously challenging the 2014 Tobacco Products Directive before the Court of Justice of the European Union.75 We conclude that: that the agreements have little or no added value and are contrary to Article 5, paragraph 3, of the WHO FCTC. The EU was right when it disapproved of the relationship between INTERPOL and PMI and publicly confirmed that “the interests of the tobacco industry are fundamentally contrary to public health”.73 It should apply the same standard to its own TTC trade. Our findings suggest that the EU should not renew its agreement with PMI and, if legally possible, terminate the agreements with the other three tobacco companies. The four agreements provide for two types of payments to the European Commission and the Member States: annual fixed payments (see Table 1) and supplementary ancillary payments (see Table 2). Fixed payments total $1.9 billion in pensions from 2004 to 2030. Pm pays the European Commission and Member States and their lawyers a total of $1.250 billion in annual payments (payment of $1 billion over 12 years and $250 million in legal fees). JTI`s annual payments total $400 million over a 15-year period, BAT`s annual payments are $200 million over 20 years, and ITL`s annual payments are $300 million over 20 years.

These payments are generally considered to compensate for losses incurred as a result of the TTC`s smuggling activities. For example, Italy – a major victim of particle smuggling activities – received the largest share (28.62% of the €1 billion paid per pm).31 For example, OLAF conducts investigations into contraband tobacco with remarkable results. A total of 619 million cigarettes were seized in 2015 with the support of OLAF, i.e. three cigarettes of each pack seized in Europe. But for Pargneaux, these agreements must be stopped. (Audio in French) In 2017, the Commission adopted legislation laying down technical specifications for traceability systems and safety features for tobacco products. The MoUs have been criticized.3 Some commentators have expressed concern about the non-transparent nature of these instruments, possibly in violation of Article 5.3 of the FCTC and the ITP. In general, some argued that international tobacco companies have encouraged the closure of memoranda of understanding as a means of liaising with governments, primarily to prevent stricter regulation of illicit trafficking. Some also pointed out that because mous are by definition non-binding, they do not create an accountability system or sanctions for non-compliance, making them ineffective in controlling illicit trade.4 The agreement is available online at OLAF (2016) Japan Tobacco 2007.

Features of the TTC-EU agreements The four current tobacco agreements are legally binding and enforceable anti-fraud transactions involving European and national counterfeit investigators. This includes annual payments from the four largest tobacco manufacturers to the EU, estimated at $1.9 billion (€1.7 billion) over a 20-year period. .